First is the denial (“No way our health insurance can cost this much!”). Then comes the anger (“Seriously!?”), the bargaining (also known as shopping around, perhaps with your broker), and the depression (“I guess we won’t be able to spend any of our budget on enhancements like we had planned—again”). If you’ve reached the final stage of your 2018 health insurance renewal (acceptance), congratulations. Even more so if your cost increases for the coming year are below 3%.
Although the trend in the employer health insurance marketplace is relatively restrained in contrast with the out-of-control individual marketplace—averaging just 2.6% for 2016-2017—overall costs remain very high. In its annual national health survey, Mercer says this continues a period of relative stability in the last 5 years.
Cost growth in the employer market has averaged just 3.3% annually during the 5-year period including 2017, compared to 6.2% over the prior 5 years, according to the survey. Notably, low cost growth was achieved without significant new migration of employees into high-deductible health plans.
Even so, the average cost of health benefits remains high, at $12,229 per employee, or 14% of payroll. The Mercer National Survey of Employer-Sponsored Health Plans 2017, says employees and employers are feeling the pinch. In 2017, employees are paying, on average, 24% of the total cost of coverage via paycheck deductions.
“The high cost of health care poses major challenges to employers and their employees,” said Sharon Cunninghis, who leads Mercer’s health business in the U.S. But there are steps employers can take, often in conjunction with their benefits consultants, to mitigate the challenges.
“We’re helping employers gain ground on some of the biggest cost drivers by such means as addressing chronic conditions with enhanced care management, and targeting double-digit spending growth on specialty drugs with a suite of pharmacy solutions,” Cunninghis explained. “When you reduce cost by improving quality, that’s a win-win.”
Incorporating Consumerism Tactics
Consumerist tactics continue to be among the primary ways employers seeks to contain (if not reduce) costs. But not as many companies moved toward consumer-focused strategies such as high-deductible health plans as had been anticipated. That may be because so many had already employed that strategy in earlier years.
The 2017 report shows that enrollment in consumer-driven health plans (CDHP) stood at 30% in 2017, up just 1 point from 2016. While a single percentage point increase from one year to the next is small, the 10-year trend tells a different story: CDHP enrollment stood at 5% just 10 years earlier. Mid-sized and large employers sometimes offer a consumer-driven plan as their only option, but more frequently, these plans are offered alongside other, more traditional, choices.
“Most employers want to give employees choices,” explains Tracy Watts, Mercer’s U.S. healthcare reform leader. “For many employees, enrolling in a high-deductible plan with an HSA is a smart financial move, but it takes some education. Decision-support models and other resources can help employees reach that comfort level, and most employers would rather go that route than take away other plan choices.”
Harness The Power of Technology to Educate and Support
Watts is referring to, among other techniques, transparency tools designed to help employees compare prices—and even quality ratings—of different healthcare providers. Technology tools can educate employees, support them in making good coverage choices, and even give them access to care in a non-traditional way.
For example, another cost saving measure coming into sharper focus in 2017 is telemedicine: 71% of employers with more than 500 employees report providing access to such services.
Via telemedicine, employees can access medical care by phone, web portal, or televideo as a covered benefit. Savings for participants can be significant, given that a typical telemedicine visit costs less than $50 while a typical office visit costs about $125.
Employees seem to like the service, although there is room for improvement; employers with these programs reported an average utilization rate of 7% in 2016. Utilization is expected to rise in the future, considering that 2016 was just the first or second year of operation for many respondents.
“Enrollment growth in CDHPs may have slowed in 2017, but employer strategies to promote consumerism and engage employees in improving their health habits are in full swing,” Watts said. “And advances in health IT are making this outreach more personalized and powerful.”
More Strategies That Seem to Be Working
The nation’s largest employers are experimenting with a variety of other strategies, such as accountable care organizations, centers of excellence and patient-centered medical homes. Some are utilizing patient advocates who can help employees find the right providers, compare costs, and resolve claims issues. Many provide an expert second opinion program, utilizing highly experienced doctors, sometimes without cost to the patient.
Any or all of these strategies may play a part in the slower rate of growth in the employer healthcare market, but the jury is still out.
“While it’s hard to say how much these initiatives, taken together, have contributed to the slowdown in cost growth nationally, the fact that individual employers are seeing positive results is encouraging,” said Beth Umland, Mercer’s research director for health. “Consumerism has an important role, but it can’t solve all of the inefficiencies in the healthcare market. Getting more value for the healthcare dollar is the common thread in these new strategies.”